How to Save Money on Workers’ Compensation Insurance

Find out how to save money on workers’ compensation insurance while facilitating a speedy recovery for injured workers.

Workers’ Compensation Premiums protect workers and their employers from the risk of injury or death caused by work-related accidents or disease. This article will review tips on saving on your Worker’s Compensation Premium and ensuring your injured employees return to regular duties as soon as possible. 

What is workers’ compensation, and how does it work?

Employees who sustain an illness or injury directly from their job are entitled to workers’ compensation. 

The underlying premise is that if an employee sustains a personal injury in the course of and as a direct result of their employment, or if they develop an occupational sickness due to their job, they are eligible for specific compensation. In this case, neither the employee’s nor the employer’s negligence will affect their rights or obligation.

Only employees, as opposed to self-employed individuals, are eligible for coverage. As an employee, you’ll reap benefits like:

  • Income replacement benefits, often equal to between fifty per cent and two-thirds of the worker’s pre-injury average weekly wage
  • Costs associated with hospitalisation, medical care, and rehabilitation
  • Death benefits paid out to surviving family members

Standard practice is to set arbitrary upper and lower limits, typically based on the state’s median weekly pay. In exchange for these guaranteed benefits, the employee and their family waive their right to sue the company for damages for any accident covered by the act.

However, the right to sue any third parties whose negligence led to the damage remains intact, with the money typically being used to pay back the employer’s compensation costs before anything goes to the employee. Usually, administrative commissions will carry out the law. And to get the job done, strict adherence to the standards of evidence, procedure, and conflicts of law is prevented.

Employers must protect themselves from legal action by purchasing liability insurance, using a state-run insurance program, or self-insuring. Because compensation premiums are a cost of doing business, they will be factored into product pricing, shifting the weight of compensation obligation away from employers and onto consumers.

Who is eligible for workers’ compensation in Australia?

Under Australian law, workers are covered by the state’s workers’ compensation programs. Since independent contractors and sole proprietors do not qualify for workers’ compensation, they are responsible for their financial security.

There is no uniform definition of worker among the many Australian workers’ compensation schemes. Nonetheless, most systems will determine whether an individual is employed under a service contract or is an employee to decide the PAYG tax.

The typical worker’s compensation programs do not protect independent contractors or sole proprietors. They are responsible for securing their income protection insurance. In most cases, they perform specific tasks under the terms of a contract for services, at which point they are self-employed business owners. 

Many service providers, such as plumbers and freelancers, are not eligible for worker’s compensation insurance since they are independent contractors.

Workers’ compensation systems currently do not allow sole proprietors or independent contractors to get workers’ compensation insurance voluntarily. That’s because it is difficult to provide insurance for those who don’t fit the traditional moulds of an employee, and the current definition of worker makes it impossible. 

Costs associated with insuring employees are often recovered through company premiums rather than directly from employees under the current regime.

Is worker’s compensation insurance required in Australia?

Any company that employs people, even only occasionally or voluntarily, must carry worker’s compensation insurance. In Australia, where the rules are strict, a company’s location is a significant factor in determining how this insurance is handled. In some U.S. states and territories, firms must use the same workers’ comp insurer across the board, but in others, they are free to select their own.

Workers who do not have access to workers’ compensation insurance may wish to investigate supplemental health and disability insurance options. In some organisational structures, the employee or the company contributes to the cost of providing commercial personal injury insurance as part of the employment agreement.

Employees’ share of the cost, either directly or through higher premiums, is increased through supplemental insurance plans. Unlike workers’ compensation insurance, which increases rates for firms if there is an increase in workers’ compensation claims, personal injury insurance arrangements do not incentivise employers to guarantee proper work health and safety practices.

In addition, unlike workers’ compensation insurance, alternative insurance arrangements provide less help to injured employees during rehabilitation and reintegration into the workforce. In addition, these arrangements are typically too expensive for people with lower incomes. They are not for new labour markets, casual workers, or lone traders.

How to save money on workers’ compensation insurance?

1. Identify possible suitable duties.

When saving on workers’ compensation premium insurance, one of the best things you can do is identify suitable employee duties. It can help to lower your overall risk and, in turn, help to lower your insurance premiums. 

Of course, ensuring that any tasks you assign are within your employees’ capabilities and safe to perform is essential. But if you can find ways to lower your risk, it can lead to significant savings on your worker’s compensation insurance.

2. Make sure you’re not paying for your subcontractors.


As a business owner, you must ensure you’re not overpaying for your worker’s compensation premium insurance. One way to do this is to ensure you’re not paying for your subcontractors.

If you have subcontractors working for you, they should have their own worker’s compensation insurance. You should not be paying for their insurance premiums.

FocusIMS provides an area to actively manage subcontractors, including following up on insurance certificates of currency expiring.

3. Communicate.

When an employee gets injured, communicating with the employee and ensuring they get the treatment they need as quickly as possible improves your chances of returning the worker to work quicker.

Communicate with medical and treatment providers, supervisors, and the insurer’s case manager. Establish expectations for time frames for return to work, then follow up on fortnightly medical certificates for progress to regular duties. It may look like increasing work time, weight limits, or reduced treatments.

 When the injured worker is back on complete duties, follow up with the insurer to get the claim closed- there are typically estimates that are included in your premium calculation until the claim is closed.

4. Establish a Return-To-Work Program.

There are typically multiple immediate expenses to consider when a person gets injured on the job. Your annual premium can increase if you sustain an injury, depending on your policy. 

Or, if you do not have insurance, you may have to pay for the injured worker’s complete medical, rehabilitation, pharmaceutical, and administrative expenditures and any fees charged by third-party administrators. There is also the prospect of wage replacement if workers cannot work or have their hours cut back.

Indirect costs can include finding and training a replacement worker, diminished output because of the ripple impact of an injury at work on the rest of the workforce, or worse quality output due to the replacement worker’s lack of relevant expertise. Naturally, if the harm is severe enough and responsibility arises, there may be legal fees to consider.

A comprehensive strategy for helping wounded workers return to work is essential for these and other reasons.

A solid return-to-work plan has a good effect on the recovery of injured workers, which is one of the many reasons you want workers back on the job as soon as possible. Those who return to the routine of their workday after experiencing an injury on the job tend to heal faster than those who remain home. 

Another strong argument is that time off from work partially determines the workers’ total insurance payments. In short, the longer an employee is out, the more money they will get in benefits, and the more their insurance premiums will increase.

There are two primary components of every decent return-to-work program:

  • Identifies potential causes of incidents that cause downtime and takes preventative measures to mitigate such risks.
  • Provides wounded workers with options for returning to work, such as reduced hours (half-time) and new responsibilities (light duty).

It’s crucial to keep lines of communication open with hurt employees and give them every chance to recover and resume productive work.

5. Managing your incidents

Managing your incidents is the best way to save workers’ compensation insurance money. By keeping track of your workplace injuries and accidents, you can identify areas where improvement is needed. It will help reduce the number of claims against your policy and lower your premiums.

When it comes to managing your workers’ compensation premium insurance, every little incident counts. That’s why it’s essential to have a plan in place to manage any incidents that occur in the workplace.

Here are a few tips to help you save big on your workers’ compensation premium insurance:

  1. Ensure you have a clear and concise incident reporting policy. It will ensure that all incidents are appropriately documented and reported on time.
  2. Investigate all incidents thoroughly. By taking the time to understand the root cause of each incident, you can implement process improvements to prevent future incidents from occurring.
  3. Take corrective action when necessary. If an incident does occur, be sure to take disciplinary action to prevent it from happening again. It could include retraining employees, implementing new safety procedures, or changing the physical work environment.

By following these tips, you can manage your workers’ compensation premium insurance and save big in the long run!

These can be managed efficiently in FocusIMS. We’ve included a couple of screenshots to get an idea about the information collected.

6. Consider safety concerns and drug testing in the hiring process.

Make safety a top priority when hiring anyone. Focus your human resources and recruitment efforts on finding candidates prioritising workplace safety. You can get safety-related information from prospective employees by thoroughly checking their references and talking to former employers. 

It is prohibited to inquire about a candidate’s history of workers’ compensation claims or if they have had injuries from previous jobs. But it is perfectly acceptable to evaluate a candidate’s awareness of the necessary safety equipment and their ability to avoid accidents by asking them questions during the interview.

Pre-employment drug testing is one measure you can take to reduce the likelihood of accidents occurring during the hiring process. In many companies, an accident triggers a random drug test. Several high-risk occupations also routinely conduct random drug tests, including construction, trucking, and utilities.

Your clients, as well as the rest of the public, may be at risk. Thus instituting random drug tests is a must.

7. Request your cost of claims from your insurer.

If you’re looking to save money on your worker’s compensation premium insurance, one way to do so is to request your cost of claims from your insurer. By doing so, you can negotiate a lower rate based on your claims history. It is just one way to save your workers’ compensation insurance money. Explore all your options to get the best possible rate.

8. Setting Objectives

Set objectives around the number of injuries and lost time. Keep it front and centre for all staff to work safely and manage injured workers to get to work safely.

Foster responsibility. Starting points could include:

  • Completing or revising all written safety programs.
  • Conducting your initial internal safety audit to detect and address hazards.
  • Completing all safety training mandated by the government.

You could aim for a certain number of days when nobody is hurt at work or for no lost time due to workplace accidents. Reward employees who report dangers or hazards or propose and implement solutions to these problems.

Safety responsibility must go from the top of a company to each worker.

Managers, teams, and front-line employees all benefit from having well-defined objectives. Reevaluate targets for safety if you fail to hit them. Consider including worker safety in performance reviews and using it as a criterion for advancement.

9. Educate Your Employees

The government mandates that all employees get a safety education. Workers need to be educated on a wide range of workplace safety themes, including how to respond to emergencies, how to use fire extinguishers, how to communicate potential dangers to others, how to stay safe if they need medical attention, how to protect their lungs and ears, and so on.

Many companies view training as a wasted investment because their workers aren’t generating income while they learn the ropes. Nevertheless, this line of reasoning fails to consider the broader picture of operational efficiency, the causes of workplace accidents, and the kind of employees who are most at risk.

The reality is that inexperienced workers have a higher risk of getting hurt on the job.

Workers with enough training pose less risk to the company and are likelier to stick around and contribute. Adequate training can mitigate an employer’s legal exposure.

Rely on trustworthy educational materials. Online safety training is becoming increasingly popular for businesses to attain compliance, accomplish safety goals, and provide a consistent training experience.

10. Conduct post-injury investigations.

The two most crucial things to do following an accident are:

  • Halt all activity in the area and on connected equipment after eliminating risks or harmful work conditions.
  • Learn what led to this incident taking place. Injuries generally result from a confluence of many different causes coming together in a specific way.

Review surveillance footage and conduct interviews with the injured worker and witnesses. As a general guideline, you should do whatever it takes to collect as much data as possible.

There are several reasons why it is crucial to investigate an incident. 

  • It’s essential to eliminate any potential for a recurrence of unsafe working conditions that lead to employee injury.
  • It will provide other workers with a better chance of avoiding similar situations in the future.

The primary goal of any incident inquiry should be eliminating future workplace injuries.

In addition, when an employee reports a claim, their employer wants to hear the facts. Claim managers can better manage claims and bring them to resolve if they can access accurate data. 

Employers must safeguard themselves against responsibility by collecting evidence and being open and willing with incident investigation documents should lawyers become involved in the case. Paperwork from well-conducted incident investigations can save companies a lot of anguish if an employee seeks to fight the claim and leave it open, either in hopes of a settlement or to perpetuate fraud.

11. Look for patterns in past claims.

Regularly reviewing your claims or requesting a more in-depth investigation of your claims history from your insurance company is highly recommended.

Employers can save money on workers’ compensation insurance premiums by identifying patterns and implementing reforms to address them.

Evaluating past claims can help you uncover subtle trends, like some departments generating more claims than others or that claims tend to surge at various periods of the year. 

You can avoid most injuries in the workplace, and pattern analysis is a priceless resource for identifying areas for safety improvements. In addition, it is common knowledge that eliminating the possibility of workplace injuries is an excellent way to save money on workers’ compensation insurance.

The insurer should have this information. They can tell you when and on what days injuries are most common and what departments or types of work tend to be the most serious. 

Your insurer should also know the types of claims and the average length of service of the employees who sustain the most significant injuries. Prioritise gathering the information necessary for implementing substantial safety improvements. With this information at your disposal, you’ll be better able to advocate for safer working conditions.

12. Provide health insurance and wellness programs.

Health Insurance

Workers’ compensation claims are filed more frequently and at higher rates when firms do not provide health insurance to their employees.

Health insurance provides employees the means to receive treatment should they become ill or injured while on the job. Employers who offer health insurance encourage their employees to take preventative measures by seeing the doctor regularly. Imagine preventive medical treatments like flu vaccines and checkups.

A healthier workforce is more productive, and workplace health incentive programs can do both. Free gym memberships for employees who meet a set attendance goal and smoking cessation, weight loss, and absence reduction contests with incentives like gift cards are just a few examples.

Wellness programs give employees several opportunities to improve their health and well-being. Activities like group bike rides, yoga courses, and seminars on stress, despair, and loss may be part of these initiatives.

The bottom line is that workers are more likely to show up to work when they are healthy, and when they are healthy, they are more likely to be focused, productive, and avoid accidents. Workers who care for their health are less likely to sustain injuries and recover quicker after illness or injury.

FocusIMS can simplify managing your business to reduce your workers’ compensation premiums.

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